City Investing Co., the former owner of Southern California Savings & Loan, will pay $15 million to a savings and loan regulatory agency to settle a lawsuit involving the way the ailing thrift and its parent company shifted certain tax liabilities.

The Federal Savings and Loan Insurance Corp., the arm of the federal government that insures thrift deposits and oversees troubled thrifts, had sued City Investing for the money after the thrift was placed in receivership in June, 1985.

Beverly Hills-based Southern California Savings was acquired in May by an investor group led by former U.S. Treasury Secretary William E. Simon and former Federal Reserve Board Vice Chairman Preston Martin.

The agreement announced on Friday involves a tax-sharing agreement under which Southern California Savings had paid about $10 million to City Investing Co. FSLIC sued City Investing, alleging that the company violated terms of that agreement by failing to return the $10 million when Southern California Savings subsequently sustained tax losses.

City Investing has agreed to pay the $10 million as well as $5 million in interest, according to a FSLIC spokesman.

After Southern California Savings went into receivership, it was first operated by Great American First Savings Bank of San Diego. During that time, the troubled thrift cut back on problem loans and last April reported a profit, FSLIC officials said.

Great American reduced Southern California Savings' asset base to $900 million from $1.4 billion, and about $175 million in problem assets and loans eventually were converted into performing assets or cash, according to the FSLIC.

Losses at the embattled institution were reduced to an average of $500,000 per month for the first four months of 1987 from as much as $5 million a month, regulators said.

In May, when Southern California Savings was sold to the new group led by Simon, the newly formed SoCal Holdings agreed to pump $43 million into the troubled institution. At the same time, FSLIC agreed to provide another $218 million in cash to enable the insolvent savings and loan to comply with capital requirements.

No assets were absorbed by FSLIC or the Federal Asset Disposition Assn., an agency that liquidates the assets of insolvent thrifts, the FSLIC spokesman said.

On Aug. 31, Southern California Savings reported $1.2 billion in assets, $836 million in total loans and $909 million in deposits.

The S&L would not release quarterly earnings figures, but a spokesman said the institution has been "profitable" since it was acquired by Simon's group in May.